AFTR Tax Withholding and Estimated Taxes Flashcards

A taxpayer who cannot pay their full tax bill by April 15 should:

Answer: File the return and pay as much as possible to minimize penalties and interest

Filing the return and paying as much as possible reduces both the failure-to-pay penalty and accruing interest, since an extension to file does not extend the time to pay.

The Additional Medicare Tax of 0.9% applies to wages and self-employment income that exceeds what threshold for single filers?

Answer: $200,000

The 0.9% Additional Medicare Tax applies to wages, RRTA compensation, and self-employment income exceeding $200,000 for single filers ($250,000 for MFJ).

Which IRS notice instructs a payer to begin backup withholding on a payee's account?

Answer: B-notice (CP2100)

A B-notice (CP2100 or CP2100A) is sent by the IRS to payers when a payee's name and TIN combination does not match IRS records, requiring backup withholding.

An employee receives a bonus paid separately from regular wages. Which withholding method allows the employer to withhold a flat 22% federal income tax?

Answer: Supplemental wage method (flat rate)

The optional flat supplemental withholding rate of 22% can be applied to supplemental wages (like bonuses) paid separately from regular wages.

Estimated tax payments made by a self-employed taxpayer are reported on Form 1040 as:

Answer: A credit against tax on the payments line

Estimated tax payments are entered on the 'Estimated tax payments' line of Form 1040, reducing the tax owed (or increasing the refund).

Which safe harbor protects a high-income taxpayer (AGI > $150,000 in prior year) from the estimated tax underpayment penalty?

Answer: Paying 110% of prior year's tax

High-income taxpayers with prior-year AGI above $150,000 must pay 110% (not 100%) of the prior year's tax liability to use the prior-year safe harbor.